The paper millionaires created by rising farm land prices in the 1970s saw these unrealized gains eroded in the 1980s. Many farmers who bought high priced farm land late in the 1970s at low interest rates on variable rate loans became insolvent (i.e., the value of their liabilities exceeded the value of their assets) in the 1980s, when interest rates rose and both net farm income and farm land prices fell, and are no longer in business (Figure 18.7).
Implications for Food and Fiber Industry
The combination of production control policies that constrained the supply of specific crops below free market levels, declining real net farm incomes, and rising real interest rates led to lower purchases of farm production inputs. Figure 18.8.A